$181 billion Indian black money in tax havens?

(THETIMESOFINDIA)Btweensixandseventrilliondollarsworthofblackwealthlieshiddenintaxhavensacrosstheworld,accordingtoafreshestimatebyatrioofsenioreconomistsfromtheBankofItaly.Indians'shareinthisisestimatedat$152-181billion,byonecalculation.

Thisisonlywealthinvestedinsharesanddebtsecuritiesorheldinbankdeposits.Itisimpossibletogetahandleonotherwealthinvestedinphysicalassetslikerealestate,goldorart.

Releasedthisweek,theseestimatesfollowthetrainofseveralsuchestimatesinrecentyearswithGabrielZucman,ofLondonSchoolofEconomics,estimatingitat$7.6trillion,BostonConsultingGroupat$8.9trillionandTaxJusticeNetworkat$21trillion.

Allofthiswealthisheldintaxhavens,whicharejurisdictionswithweakregulationsandstrongsecrecylaws,usingshellcompaniestoconcealoriginalidentities.TheItalianeconomistsanalyseddatafromIMFandtheBankofInternationalSettlements(BIS)toarriveatthefigure.

Newtaxschemetodigoutdomesticblackmoney

WhenaskedbyTOItoestimatetheIndianshareinthisgigantictreasuretrove,theresearcherswerecautious.

Therecanbetwowaysofdoingthis,theytoldTOIviaemail.OneistoassumethattheIndianshareinthisglobalhiddenwealthwassimplythesameasIndia'sshareinglobalGDP,thatis,about2.5%in2013,theyearforwhichthisdatapertains.Bythismeasure,theIndianshareofhiddenwealthis$152-181billion.That'saboutRs8.9to10.5lakhcrore.

AnotherwayoffindingouttheIndianshareofundeclaredassetsistolookattheIndianshareinactualdeclaredportfolioassets—about0.07%ofthetotal—andassumethatthesameisvalidforhiddenassets.Bythisway,India'sshareinblackassetsworksoutto$4-5billionoraboutRs25,000-30,000crore.

Blackmoney:RBItoshareFDI-relatedinformationwithIB,RAW

ThesefiguresforIndiaarejustindicativeandthethreeeconomists—Pellegrini,SanelliandTosti—wereinsistentthatthey"havetobeconsideredwithgreatcareandinnowaycanrepresentfirmdata".But,havingsaidthat,thereisnootherwayofgettingevenaglimpseofthesecretstockpileofwealthstashedawayabroadbyIndians.So,asaballparkfigure,itdoesgiveahintofwhatliesburied.

WhyisthereabigdiscrepancybetweenthetwomethodsofcalculatingIndia'shiddenwealthintaxhavens?AstheItalianresearchersexplained,Indiansseemtohaveamuchlowerpropensityforinvestinginforeignfinancialassets—that'swhytheirshareinglobaloffshorefinancialassets,ascalculatedfromIMFdata,isapuny0.07%.Butwillthisreluctanceextendtosecretinvestmentstoo?Nobodyknows.

Rahulmocks'fair&lovely'schemeforblackmoney

Inallprobability,Indianshareinforeignblackmoneyissomewherebetweenthetwoestimatescomputedabove.Thisissupportedbyestimatesofoffshorewealthgrowthbyvariousagencies.IntheGlobalWealth2015Report,theBostonConsultingGroupsaysthatsharesofoffshorewealthfromMiddleEastandAfricaregion,LatinAmericaandAsiaPacificwerehigherthanWesternEuropeandNorthAmerica,althoughitalsopointsoutthatAsia-Pacificcontributionisnotsohigh.